Strategic supply management and mechanism choice in government debt auctions: An empirical analysis from the Philippines

Abstract

We examine bond auctions in the Philippines by using bid data from around 500 Treasury auctions. The Philippines features a strategic auctioneer who uses both discriminatory and uniform-price auctions, and actively manages supply. Here, discriminatory auctions generate lower borrowing costs, at the expense of concentrating awards among fewer bidders. We observe that the decision to restrict supply is driven by borrowing cost and strength of demand. Bidders adjust for winner’ s curse by submitting bids with higher yield spreads in response to higher volatility and more competitors. Though bidder heterogeneity exists, average auction profits do not significantly differ across bidder types.